The UK housing market started the year on a positive note, with Halifax reporting that average prices rising by 0.7% in January – more than recovering the slight dip of 0.2% in December. 

This increase pushed the average property price to a new record high of £299,138. However, annual growth slowed to 3.0%, the slowest rate since last July.

Amanda Bryden, head of mortgages at Halifax, says: “Affordability is still a challenge for many would-be buyers, but the market’s resilience is noteworthy. There’s strong demand for new mortgages and growth in lending. With a stamp duty increase looming, some of this demand may have come from first-time buyers eager to complete transactions before the end of March.

“Despite geopolitical uncertainties, and waning consumer confidence, other key indicators look fairly positive for the housing market. The Bank of England has made its first base rate cut of the year, and there are probably more to come. Household earnings are expected to continue outpacing inflation – albeit that gap may narrow – easing some of the financial pressure still being felt from the cost-of-living squeeze.

“As things stand, mortgage rates are likely to hover between 4% and 5% in 2025, influenced by both global financial markets and domestic monetary policy. Over the past year, buyers have been getting used to this new normal, understanding that rates are unlikely to return to the historical lows of 1%.

“But the fundamental issue in the housing market remains the lack of supply. This long-term trend, coupled with a gradual improvement in affordability, should support further modest house price growth this year.”

The rate of annual property price inflation slowed in two thirds of the UK’s nations and regions at the start of the year.

Northern Ireland continues to have the strongest annual property annual price growth in the UK, though at 5.9% in January this eased considerably compared to December (7.3%). Properties in Northern Ireland now cost an average of £205,473.

House prices in Wales were up 3.6% compared to the previous year, with properties now costing an average of £227,397.

Scotland once again saw a lower rise in house prices compared to the rest of the UK, with properties in the country now worth an average of £210,690, some 2.4% more than the year before.

In England, the North East has overtaken the North West as the region with the strongest annual property price growth, up 5.2% compared to the previous year, with properties now costing an average £178,696. This is the first time since September 2023 that the North West has not topped the table of English regions for annual growth.

London retains the highest average house price in the UK, at £548,288, up 2.8% compared to last year.